Midlothian Council £600k return on £13m Croydon investment

Thursday June 17th 2021

Midlothian Council Fairfield House Main

Written by Midlothian View Reporter, Luke Jackson

A review of Midlothian Council’s treasury management or ‘cash flow’ by external auditors EY confirms that the local authority has not lost any money by depositing funds with The London Borough of Croydon Council.

Indeed the council confirms the deposit will generate a £601,000 return in total over two and a half-years, the equivalent of funding 10 full-time learning assistants over that same time period.

The EY report has also agreed with the council’s internal audit opinion that councillors and the Midlothian community can place substantial assurance on the arrangements in place covering this critical aspect of Council business. The auditors found comprehensive best practice policies and procedures are in place, and Midlothian’s borrowing rates are among the lowest among councils across Scotland.

The increased attention and scrutiny of treasury management, along with specific concerns expressed by members of the Audit Committee, led to EY considering treasury management as an area of increased focus as part of their wider scope audit procedures in 2020/21.

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Midlothian Council Leader Councillor Derek Milligan said: “Sound financial management is key to improving the lives of local people and I welcome the substantial assurance this report brings.

“How we manage public funds must be open to the highest degree of scrutiny.

“The findings of the EY review will reassure councillors, members of Audit Committee and the public that our Treasury Management and Investment Strategy (which is critical to financing our ambitious capital investment programme including new homes and schools) is in line with the principles of key guidance from the standard setting public body, The Chartered Institute of Public Finance and Accountancy (CIPFA).

“We can, and have, demonstrated that good practice is in place and EY’s report confirms we are following that best practice.

“Yet again this council is one of the top performers when it comes to managing its treasury management activity and, as the separate year end update to members indicates, the effectiveness of our strategy saves us over £1.8 million per annum when compared to the Scottish average.  That is the equivalent to the funding of 60 full time jobs.

“The Croydon deposit too is helping us fund services with a £601,000 return in total, the equivalent of funding for eight full-time grade 3 staff per annum.”

The EY review concludes:

  • There is no implication that the council has undertaken any controversial “debt for yield” activities.
  • The council has not suffered any loss in respect off the deposit placed with the London Borough of Croydon Council.
  • The council has adopted the treasury management practices outlined in the Treasury Management Code and an internal audit review provided substantial assurance that comprehensive policies and procedures are in place.
  • The council has historically managed to achieve one of the lowest weighted average borrowing rates when compared to other Scottish local authorities. The loans fund rate for the council in 2020/21 is estimated to be 3.1%, against the 2019/20 weighted average across the sector of 3.7%.

The report makes four recommendations aimed at further strengthening governance of this critical aspect of Council business

Given the importance of the report, a briefing is arranged for all members and the independent members of the Audit Committee and the report will be presented to the council’s Audit Committee on 22 June 2021 before being considered by the full Council later in June.

FAQs about the Croydon deposit can be found on the council’s website.

The report is agenda item 5.4 of the Audit Committee papers here

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